U.S. Senate Drives a Stake Through Heart of Patent Reform

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U.S. Senate Drives a Stake Through Heart of Patent Reform

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Patent reform seemed just around the corner. In December, the House of Representatives passed the Innovation Act by a margin of 325 to 91. The bill, which would have made it harder to file spurious patent suits, had the blessing of President Barack Obama. All it needed was to pass the Senate.

But on Wednesday, Senator Patrick Leahy, a Democrat from Vermont, announced on his website that he has taken the bill off the Senate Judiciary Committee.

Large technology companies, and even some small businesses, have been plagued in recent years by patents suits brought by "patent assertion entities," better known as patent trolls. These companies own patents, which they've generally acquired from failed companies, but don't make any products or offer any services themselves. They exist purely to sue other companies for patent infringement. The Innovation Act was a much anticipated piece of legislation aimed at stopping this behavior, and the bill's death is a major step backwards for patent reform.

There is still the possibility that the bill could stage a comeback. "If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the Committee," Leahy wrote in the announcement. But outside observers think it's unlikely.

"I think the odds of it being resurrected in an election year are fairly low," says John Martin, CEO of the patent analytics software company Innography.

The bill included provisions that would have allowed companies to shield their customers from patent suits and required those filing suits to detail how, specifically, a defendant violated a particular patent. But one of the most controversial provisions, which House Republicans insisted on, was a practice known as fee shifting, meaning that the loser of a suit would have to pay the legal fees for the winner. The idea is that fee shifting might help discourage frivolous claims and encourage wrongfully targeted companies and individuals to fight back. But Martin says the idea encountered push-back because it goes against the grain of traditional U.S. policy. "The Senate Judiciary Committee wanted to carve out more discretion for the judges," he says.

There were also concerns about the way patent trolls were defined within the legislation, and whether it would have made it harder for independent inventors to protect their creation. "Whether you think that's a good thing or not depends on your point of view on the actions of patent trolls," says Martin.

The Electronic Freedom Foundation, which supported the bill, was more direct. "This provision does not prevent a legitimate patent holder from protecting its invention," reads a statement on the organization's website. "In fact, it makes it easier by consolidating its claims into one forum."

The organization placed the blame for the bill's death squarely on Leahey, who previously introduced the controversial PIPA bill, which would have forced ISPs to blacklist certain websites. "Leahy effectively deferred a problem—a serious problem he readily admits exists—in order to please the pharmaceutical, biotech, and university lobbies that are hardly the victims of patent trolls anyway," the statement reads.

On the bright side, the legislature isn't the only place to combat patent trolls, Martin says. There's still plenty of room for courts and state prosecutors to take action. And President Obama has taken a number of executive actions to try to deal with the issue, including providing resources for companies that have been sued or received cease and desist notices, creating training program for patent examiners to help them better evaluate patent applications and claims, and announcing an initiate to crowdsource "prior art" research.